Monthly and yearly average
Monthly and yearly average are the plain arithmetic means of a strategy's monthly and annual return series over the backtest period, listed in the metrics table as "Monthly average" and "Yearly average" in the Averages group.
Also seen as: average monthly return, average annual return, Avg month
Both are simple averages — the figures in a series added up and divided by how many there are — not compounded growth rates, which is what makes them read differently from CAGR.
How are the monthly and yearly averages calculated?
Each is the arithmetic mean of its own return series.
- the plain mean of the monthly returns
- the number of months in the backtest period
- the return of month i
The yearly average is the same calculation over the series of annual returns, with n as the number of years.
How does Fincanva handle it?
- Both appear in the Averages group of the metrics table, labelled "Monthly average" and "Yearly average", as percentages to one decimal place and coloured by sign.
- The monthly returns view shows the same monthly figure as a KPI labelled "Avg month".
- Neither is annualized or compounded — the annualized slot in Performance Metrics holds CAGR or AAGR instead, depending on the Reinvest profits assumption.
- The monthly average is computed over the same month-by-month series the monthly returns heatmap displays; the yearly average uses the annual returns the by-year metrics table lists as "Annual return (%)".
Why is the yearly average not twelve times the monthly average?
Because each yearly return already compounds its own twelve months, while the monthly average only adds monthly figures up and divides. Compounding means a year's return is built by multiplying its months together, not by summing them, so the annual series carries growth-on-growth that the monthly series does not. Multiplying the monthly average by twelve therefore usually lands below the yearly average, and neither result is the strategy's compounded growth rate — that is CAGR, or AAGR when Reinvest profits is off.
What counts as a good value?
A positive monthly or yearly average means the typical period in the series gained rather than lost, but an arithmetic mean hides how spread out the figures were: two runs with the same monthly average can have completely different best and worst months. Comparing the yearly average with CAGR is the useful reading — a yearly average far above the run's CAGR points to returns that swung widely from year to year, because dispersion drags a compounded rate below an arithmetic one.
What does it look like in practice?
A five-year backtest has 60 monthly returns that add up to +45 percentage points, so its monthly average is 45 ÷ 60 = +0.75% a month. The same run's five annual returns are +14%, −6%, +21%, +3% and +16%; they add up to +48, so the yearly average is 48 ÷ 5 = +9.6% a year. Twelve times the monthly average is 12 × 0.75% = +9.0%, below the +9.6% yearly average, because each annual figure already compounds its own twelve months while the monthly average simply adds them up. Neither +0.75% nor +9.6% is the run's CAGR, which compounds the whole period into one rate.
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UPDATED 2026-10-07